Pa. drilling fee raises more than $200 million

September 11, 2012

Pennsylvania's new fee on gas drillers has raised more than $200 million, most of which will be distributed to counties and towns to fix roads, restore water supplies and pay other expenses borne by local governments in the Marcellus Shale region.

A state law signed in February imposed the so-called "impact fee" on energy companies exploring the Marcellus Shale, a sprawling rock formation that holds the nation's largest reservoir of natural gas. Drillers were required to pay $50,000 for each horizontally drilled well and $10,000 for each vertical well drilled through 2011.

The Public Utility Commission, which collects the fee, announced Monday that it raised nearly $206 million from 4,453 wells. Of that, the drillers have paid nearly $198 million, the PUC said.

The state will take about $25 million off the top. Sixty percent of what's left will be split among 37 counties and some 1,500 municipalities hosting gas wells. The money can be used to fix roads, bridges and other infrastructure, provide affordable housing, preserve open space and buy equipment for first responders, among other expenses.

The rest of the fee revenue will be split among state agencies dealing with drilling impacts.

Bradford County, the most heavily drilled county in Pennsylvania, expects to receive $6 million to $9 million. Commissioner Daryl Miller said Monday that while ideas are still being discussed, the county might use the money to retire debt and lower property taxes, a permissible use under state law. Another idea: Hold some of it in reserve "for unforeseen situations as a result of drilling activity," he said.

"We're working through a process to evaluate best uses for the money, to get the biggest bang for the buck for the taxpayers of this county," Miller said.

As expected, the most prolific drillers in the Marcellus paid the most money. Oklahoma City-based Chesapeake Energy Corp. was tops with $30.8 million paid on 624 wells. Two others paid more than $20 million: Calgary, Canada-based Talisman Energy Inc., $26.4 million on 540 wells; and Fort Worth, Texas-based Range Resources Corp., $23.7 million on 475 wells.

The PUC data showed that 58 drillers owed money. Of those, the PUC said, 17 were delinquent. The agency said a subsidiary of Houston-based Carrizo Oil & Gas Inc. had the largest unpaid bill of $3 million, though company spokesman Richard Hunter said Monday the check has already been mailed.

The drillers' next payment is due April 1 for wells drilled in 2012. The fee, to be collected once a year for 15 years, will slide up and down with the price of natural gas.

The Marcellus Shale Coalition, an industry group, used Monday's announcement to press for "local zoning uniformity." A state appeals court recently struck down sections of the new Marcellus law that prohibited most local regulation of drilling sites. The ruling is under appeal to the state Supreme Court.

"At a time when budget shortfalls are stretching state and local governments to their limits, responsible American natural gas production is helping to support tens of thousands of good jobs and providing enormous, much-needed revenues for critical services," coalition president Kathryn Klaber said in a statement.